Journal
MANAGEMENT SCIENCE
Volume 63, Issue 2, Pages 279-297Publisher
INFORMS
DOI: 10.1287/mnsc.2015.2317
Keywords
risk aversion; portfolio choice; crowdfunding
Funding
- Program for Financial Studies
- ESRC [ES/M010341/1] Funding Source: UKRI
- Economic and Social Research Council [ES/M010341/1] Funding Source: researchfish
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We estimate risk aversion from investors' financial decisions in a person-to-person lending platform. We develop a method that obtains a risk-aversion parameter from each portfolio choice. Since the same individuals invest repeatedly, we construct a panel data set that we use to disentangle heterogeneity in attitudes toward risk across investors, from the elasticity of risk aversion to changes in wealth. We find that wealthier investors are more risk averse in the cross section and that investors become more risk averse after a negative housing wealth shock. Thus, investors exhibit preferences consistent with decreasing relative risk aversion and habit formation.
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